Are Hybrids "loss leaders" for Manufacturers?

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Unless what GM President says is true. They added the 2 billion in R&D to their advertising budget and wrote it all off. In which case the people of Japan & the USA paid it with the loss in tax revenue from Toyota. With a big bank account Toyota can dump a lot into a project and not feel it. They have DEEP pockets.

me: what does that mean, can you tell us specifically? Is it the parts? Is it parts and labor? Is it parts, labor, overhead, and design?

I can tell you that it is very expensive to design and build a vehicle that does not share parts with other vehicles. Low volume vehicles have very high costs because if it costs $100M to design car A and the same for car B, and car A sells 100K units, and car B sells 500K units, which is going to need to make mucho profit? Car A. And if you have a factory and you're only running it at partial capacity as the Prius must have been from the sales numbers you saw that increased every year, then for those first few years a lot of money was lost. A factory has certain fixed costs (property tax, repairs, heat, lighting, security ...) no matter if you barely run it.

That is not a "big" corporate loophole. Advertising costs are part of the cost of doing business, and can be written off by all companies, and rightfully so.

You are right it is for all businesses. It is a big tent and many questionable charges get thrown into that column. Hummers, corporate jets, trips, lunches, dinners, R&D on the hybrids, "loss Leaders".

And what do you think the cost of that Prius Super Bowl ad was? That was 30 sec right? Maybe $500K? $600K? That means that ad meant they gave a Prius away every second. That is why high volume is critical for products, or else you charge $40K - $80K for low volume vehicles like Porsches?

Chicago Tribune today had two Toyota dealers ads informing the buying public that they now have several Prius cars INSTOCK. This would indicate to most that there is a change in the winds at Toyota and the old saying of "supply & demand are both running strong. Ads on T.V. and much more cars on the lot equal hybrid success.Culliganman(gas @ $2.09 today)

Still if companies like GM or Toyota are labeling their Hybrid R&D as "advertising", that's still wrong, and something should be done to eliminate that loophole. No wonder most corporations pay Zero taxes.

you: Still if companies like GM or Toyota are labeling their Hybrid R&D as "advertising", that's still wrong, and something should be done to eliminate that loophole.

me: It is not necessary to call R&D = advertising. R&D is an expense, and Advertising is an expense. All expenses are deducted from revenues, and if anything is left that's what gets taxed. These aren't "loopholes".

you: No wonder most corporations pay Zero taxes.

me: If a company has no profit they pay no income tax. The income tax rate for a company is typically 40%. But even if the company pays no income tax, they still have paid or generated considerable taxes. How you ask?They must contribute 7% of wages to social security, they must pay Unemployment Insurance, they pay for health insurance which otherwise might be under Medicare, and they pay wages to employees who pay income taxes and social security.

So just by being in business a corporation such as GM or Toyota generate large amounts of revenue for the governements, and keeps down government spending, just by being in business, whether they pay income tax or not. Look at the big picture and not just 1 single point of an issue.

The corporation doesn't pay SS Tax, or Healthcare. They simply compute your wage as $40 an hour, subtract those costs, and give you the remainder as $30/hr to your paycheck. YOU are paying those expenses, but you don't realize it, because it's hidden.

OT: Ask your employer how it works. Yes, you pay 7% or so from your paycheck, but your employer also has to match that, which doesn't come out of your paycheck. See: http://www.ssa.gov/pubs/10059.htmlIf you make $20/hr and work 40hr you get $800 gross. You'd have $56 taken out of your check. but your employer has to match that $56 and send it to SS.

And many people who work at mid-to-large size companies get health insurance (usually the employer will pay 80%).

Those SS, Medicare, health, 401K contributions, advertising, property tax ... are all expenses that get subtracted from revenues. They are all deductible, before profits are calculated. Believe me, I've just taken graduate classes in Accounting and Economics.

And I'm sure the system is very similar in Japan, as competition in different industries usually means that expenses are large compared to profits. A company may need to pull in $1,000,000 in revenue, have expenses of $950,000, to make $50,000 profit, and then get taxed 40% on that $50K, to net $30K.